Taylor Wimpey drives margins, sees stable market

Published 03rd Aug 2011

Housebuilder Taylor Wimpey (TW.L) reported a rise in first-half margins and profit and predicted a stable housing market, despite economic conditions forecast to be tough for the remainder of the year.

The head of the country's second largest builder by market value said only an external shock, such as a bank collapse or major debt default, could destabilise a market that has not fallen in terms of prices since the start of 2009.

"What we're seeing within the UK housing market is a very balanced market ... (It) seems to be pretty resilient, particularly helped by the lack of supply," Chief Executive Pete Redfern told journalists on Wednesday.

"So as long as a homebuilder is not expecting significant volume or price growth, that balance seems to be quite stable," he added.

This echoes comments from peers in July, while analysts indicated a chronic lack of housing in the UK would continue to act as a prop to the industry.

The economy is expected to grow at a sluggish pace this year as consumers scale back spending and uncertainties about the global recovery weigh on sentiment.

Looking forward to the important Autumn selling period, Redfern said the group is encouraged after stronger-than-usual sales in the month of July.

"If the summer so far is anything to go by then we feel reasonably positive," he said.

Taylor Wimpey reported a first-half pretax profit of 28.9 million pounds, against a loss of 2.3 million in the same period last year.

A bid to cut costs and improve the product mix saw a margin recovery to 9.3 percent from 6.1 percent in the same period last year, beating analyst expectations and helping drive profitability, said Rachael Waring at Panmure Gordon

"It's such a strong performance in the first half, if they can just carry that forward into the second half, they're going to be in a relatively strong position," she said.

Taylor Wimpey completed 4,707 homes in the first half against 4,804 homes in the same period last year, as it chases margins over volumes. The group is targeting 10,000 sales for the year and is looking to deliver a double-digit percentage UK operating margin in 2012.

The average selling price remained flat at 168,000 pounds in the same period last year.

Growth in Britain's construction industry was broadly steady in July, but residential construction shrank for a second month running.

The housing industry has been struggling to pick up since the financial crisis, with many consumers reluctant to borrow heavily to buy property while the important first-time buyer market has been shut-down by high-deposit requirements from mortgage lenders.

After recently completing the sale of its North American business, Taylor Wimpey said it will focus on investments in the UK, and has approved the purchase of 5,289 plots on 55 sites.

Shares in Taylor Wimpey were down 0.58 percent at 09:54 a.m. British time, outperforming the FTSE Midcap index down 1.05 percent.

Source: ' Reuters '

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